KResearch forecasts 2.6 per cent economic growth in 2021
Kasikorn Research Centre (KResearch) expects the Thai economy in 2021 to see an improvement compared to this year, with growth projected at 2.6 per cent for the base-case scenario, or within a range of 0.0-4.5 per cent.
KResearch has revised upward its gross domestic product forecast for 2020 to a contraction of 6.7 per cent.
Nattaporn Triratanasirikul, KResearch assistant managing director, said that the Thai economy in 2021 is expected to see growth of 2.6 per cent – a rebound bolstered by government spending, in both consumption and investment.
However, GDP growth will remain modest amid the uncertainties surrounding the Thai economy.
Meanwhile, the course of the global economy in 2021 will again revolve around the Covid-19 pandemic, as adequate supply and distribution of the coronavirus vaccines remain a concern despite progress in their development.
Thailand’s reopening of the country to welcome inbound tourists is therefore likely to be only gradual during the second half of 2021. Moreover, the strengthening of the baht and domestic political issues will pose additional risks to the Thai economy, KResearch said.
At the same time, Thai exports are expected to grow 3.0 per cent in 2021 after seeing a contraction of 7.0 per cent in 2020.
The recovery of exports has been hindered by the stronger baht, which is likely to breach Bt30/USD amid the slow global economic rebound.
Therefore, the government’s economic stimulus measures are still necessary to maintain Thailand’s economic stability.
KResearch assesses that the government’s remaining budget of around Bt500 billion left from an executive decree empowering it to borrow Bt1 trillion, and the fiscal 2021 budget, will likely be adequate to maintain the economy with no need to create more debt, in the case the Covid-19 pandemic in the country does not worsen to the extent that another lockdown is required.
Regarding monetary policy, Thanyalak Vacharachaisurapol, KResearch deputy managing director, is of the view that the Bank of Thailand may assess the economic situation in phases.
If there are signs of downside risks to the economic recovery, the Monetary Policy Committee may have room to cut its interest rate by another 0.25 per cent or reduce contributions to the Financial Institutions Development Fund so that commercial banks can cut their lending interest rates.
However, such actions should be undertaken concurrently with other policies, as well. Effective actions may include soft loan restructuring and loan guarantee by the Thai Credit Guarantee Corporation, Thanyalak said.
Meanwhile, one of the important challenges facing the financial sector is asset quality supervision to ensure that borrowers receiving financial relief – who account for more than one-fourth of the total loan portfolio – can repay debt as usual, while the BOT’s relaxed debt classification criteria may cause reported NPLs of the Thai commercial banking system to approach 3.53 per cent by the end of 2021, from the projected 3.35 per cent at the end of 2020, which is considered moderate.
Regarding the industrial trend for 2021, Kevalin Wangpichayasuk, KResearch assistant managing director, sees most of Thailand’s major industries to be on positive trajectories of recovery, but generally only resulting from a very low base in 2020; in addition, each industry’s differing conditions will lead to differing rates of recovery.
The three industries which are set for only a slow recovery and have issues that require monitoring are: 1) the tourism industry, which will continue to be ravaged by the Covid-19 pandemic, that may prompt the government to implement more specific assistance measures including loans to boost liquidity, establishment of funds, and warehousing for businesses as means of aiding in their survival;
2) the real estate industry, which may still face liquidity issues amid unsold housing supply expected to amount to around 220,000 units by the end of 2021; thus, property developers should still remain cautious of launching new housing projects;
and 3) the automobile industry, which has begun to show signs of recovery and will likely be able to overcome the immediate challenges. However, the industry going forward will have to contend with issues requiring carmakers to raise manufacturing standards to accommodate the cars of the future, or risk losing the potential for export growth.
Such a scenario also presents a challenge to other industries, wherein failure to make timely adjustments could lead to a permanent loss of competitiveness.
